公司理財(雙語)npv(編輯修改稿)
2025-01-04 22:00 本頁面
【文章內(nèi)容簡介】 ount for the time value of money? Does the AAR rule account for the risk of the cash flows? Does the AAR rule provide an indication about the increase in value? Should we consider the AAR rule for our primary decision rule?,919,Advantages and Disadvantages of AAR,Advantages Easy to calculate Needed information will usually be available,Disadvantages Not a true rate of return。 time value of money is ignored Uses an arbitrary benchmark cutoff rate Based on accounting net income and book values, not cash flows and market values,920,IRR – Definition and Decision Rule,Definition: IRR is the return that makes the NPV = 0 Decision Rule: Accept the project if the IRR is greater than the required return,921,Internal Rate of Return,Example You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?,Internal Rate of Return,Example You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?,Internal Rate of Return,Example You can purchase a turbo powered machine tool gadget for $4,000. The investment will generate $2,000 and $4,000 in cash flows for two years, respectively. What is the IRR on this investment?,Internal Rate of Return,IRR=28%,Decision Criteria Test IRR,Does the IRR rule account for the time value of money? Does the IRR rule account for the risk of the cash flows? Does the IRR rule provide an indication about the increase in value? Should we consider the IRR rule for our primary decision criteria?,926,Summary of Decisions for the Project,927,NPV vs. IRR,NPV and IRR will generally give us the same decision Exceptions Nonconventional cash flows – cash flow signs change more than once Mutually exclusive projects Initial investments are substantially different (issue of scale) Timing of cash flows is substantially different,928,Internal Rate of Return,Pitfall 1 Lending or Borrowing? With some cash flows (as noted below) the NPV of the project increases s the discount rate increases. This is contrary to the normal relationship between NPV and discount rates.,Internal Rate of Return,Pitfall 1 Len
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